Intro to Business

Unit Four Business Operations

Chapter 12Small Business Management

GOALS Describe the characteristics of small

business owners.

Identify key steps small business owners follow to start their business.

Explain the importance of a written business plan.

Detail various types of financing for a new

business.

Characteristics of Small Business Owners Advantages:

Independence Control Set your own schedule Make your own decisions

Disadvantages: Long hours Customer complaints Making payroll Taking responsibility

for everything

Characteristics of Small Business Owners Small Business Ownership is risky Fewer than ½ of all new businesses survive 5 yrs

Personality–Based: Self-motivation Risk-taking Persistence

Business-Related: Knowledge & Skills

Management, finance, marketing, business operations

Most importantly – EFFORT

Key Steps in Starting a Business An Idea Plus Experience

Begins with an idea Hobbies, interests, and business experiences Training and experience from previous jobs Various aspects of business operations

Right Place and Time Location – customer traffic Location – manufacturers, wholesalers,

transportation, supplies accessible Timing – customer demand is high

Key Steps in Starting a Business Team Approach

Even the most independent people need help Team = employees with right abilities

Preparation and Research Preparation is most important step

Having adequate information to make good decisions Time spent gathering and studying information Info about: customers, competitors, operations and

activities, government regulations, etc. Sources: Libraries, Internet, Business Assistance Centers

Importance of Business Plan (Pg164) Business Plan: a written description of the

business idea and how it will be carried out, including all major business activities.

Key Features: General Description of Company Qualifications of the owner(s) Description of Products & Services Analysis of Market (demand, customers, competition) Financial Plan

Forces owner to consider activities, time & cost

Importance of Business Plan (Pg164) Why write a Business Plan?

Persuade lenders/investors top help finance venture

Developed plan to follow through with: Layout the idea Analyze the concept Make decisions about business activities

(production, marketing, staffing, financing, etc.)

Provides Owner with: Game Plan Timeline Goals

Financing Options Start-Up Financing

Amount of money needed to start the business

Short-Term Financing Money needed to pay for current operating activities of a

business; Usually LESS THAN 1 year

Long-Term Financing Money needed for the important resources of a business

(such as land, buildings, equipment) that will last for many years

Financing Options Sources of Financing

Owner’s funds Sole-Proprietorship = Personal savings Partnership = contributions from both parties

Borrowed funds Loans from banks Loans from other financial institutions Financing from private investors Financing from other companies

Intro to Business

Unit Four Business Operations

Chapter 13Managing Human Resources

GOALS Explain why human resources are

important to the success of small business.

Identify factors to be considered by a small business owner when assessing human resource needs.

Outline types of compensation and typical benefits for employees.

Importance of Human Resource Human Resources

The people who work for a business

Small business may have few employees Impact of one person can be very noticeable Responsible for a number of activities May make key decisions & solve problems

Human Resource Needs Human Resource Management

Ensures that employees are available, that they are productive, paid, and satisfied with their work.

Human Resource Needs Categorizing Human Resources

Staffing is vital Once hired, employee is paid (profitable or not) Contribute to company’s profitability

Permanent: long term commitment Temporary: specific time frame or assignment

(seasonal) (Full/Part)

Full-Time: regular schedule, 30+ hours per week Part-Time: fewer hours, fewer days (afterschool)

Human Resource Needs Determining Employee Qualifications

What work needs to be completed? (current or new activities)

What skills are needed to do the work?

What type of employee? Permanent or Temporary; Full or Part-Time?

Goal: Hire people who can meet those needs

Human Resource Needs Locating New Employees

Young & Older Employees looking for part-time. Provides convenient location more flexible schedules pleasant work environment.

Skilled Workers Want more decision-making responsibility Greater variety of workload Prefer smaller organizations

Human Resource Needs Locating New Employees

Human Resource Needs Hiring New Employees

Less formal than large company

Compensation & Benefits Compensation

amount of money paid to employee for work performed. Consists of two parts:

1. Salary & Wages: direct payment to employee for work completed

2. Benefits: indirect forms of payment (i.e. insurance, vacation, paid parking)

Compensation & Benefits Time Wage

Pays employee a specific amount of money for each hour worked.

Straight Salary

Pays a specific amount per week or month worked.

Neither based on amount or quality of work.

Compensation & Benefits Financial Incentives

Commission: performance reward (% of sales they were responsible for making)

Piece Rate: performance reward(amount per unit of work produced)

Base Plus Incentive: wage or salary in addition to (PLUS) performance reward

i.e. Profit Sharing: receive regular pay plus a share of the profits earned by the company

Encourages commitment to company, teamwork, effective customer service, etc. to ensure higher profits.

Compensation & Benefits Fringe Benefits

Businesses offer and pay costs of benefits: Compensation (including overtime pay) Social Security Medicare Unemployment Workers Compensation (injury) Insurance plans (Health, life, dental, disability)

Vacation Benefits Paid for time they aren’t working, but makes happier,

more productive employees in the long run.

Intro to Business

Unit Four Business Operations

Chapter 14Maintaining Financial Information

GOALS Identify common sources of financial

information for small businesses.

Describe the 3 types of business budgets.

Outline the primary financial records needed to manage a small business.

Explain the financial statements used by a

business.

Financial Planning Business Budget

1.Anticipate sources and amounts of income2.Predict the types and amounts of expenses for

a specific business activities or entire business

Income (Revenue) – Money Received Expenses – Cost of Operating

Financial Planning Sources of Information

Small Business Administration Planning tools for small businesses (develop budget)

Private Businesses (Collect & Publish Info) Dun & Bradstreet Value Line Standard and Poor

Financial Planning Sources of Information

Business Magazines Fortune http://money.cnn.com/magazines/fortune/ Forbes http://www.forbes.com/ Entrepreneur http://www.entrepreneur.com/ Black Enterprise http://www.blackenterprise.com/ The Wall Street Journal http://online.wsj.com

Professional Associations National Federation of Independent Business

http://www.nfib.com/ National Retail Merchants Associations

http://www.retailmerchants.com/

Budget Prep – Budget #1 Start-Up Budget

Plans income and expenses from beginning of the business until it becomes profitable

Needed before business can begin selling:Buildings, equipment, inventory, supplies, materials, employees, utilities, licenses, advertising, transportation

Investments and loans help get them started

Budget Prep – Budget #2 Operating Budget

Financial plan for day-to-day operations of the business

Six months to a year

All revenue and expenses are listed and the planned net income (loss) for the period of time is shown.

Budget Prep – Budget #3 Cash Budget

An estimate of the actual money received and paid out for a specific time period

Anticipates that cash will come into a business and that cash will be paid out during each week or month of operation.

Financial Records Used to record and analyze the financial

performance of a business.

Cash Records: list all cash receipts and disbursements

Records of Accounts: Accounts Payable: identifies companies from which

credit purchase were made (we owe them)

Accounts Receivable: identifies companies that have made credit purchases (they owe us)

Financial Records Inventory Records

Identify the type and quantity of products available for sale. (needed for control & security)

Payroll Records Contain info on all employees and their earnings

Asset Records Identify buildings and equipment owned by business,

their original and current value, & the amount owned if money was borrowed to purchase assets.

Financial Statements Reports that summarize the

financial performance of the business.

Balance Sheet Lists assets, liabilities, and owner’s equity (capital) Prepared every six months or every year

Income Statement Reports revenue, expenses, and net income (or loss)

from the business for a specific time period. Prepared every month (new) or 6 months (established)